iesy Repository GmbH - Irish Stock Exchange

Employees The following

Employees The following table sets forth the number of ish’s employees actively engaged in business as of December 31, 2002, 2003, and 2004: 188 As of December 31, 2002 2003 2004 Sales and marketing 192 86 80 Network and technology 654 398 395 Customer operations 340 282 289 Finance and administrative 173 130 127 ish KS 27 27 23 Total number of employees 1,386 923 914 In 2002 and 2003, ish restructured certain aspects of its workforce and reduced its workforce from approximately 2,500 to approximately 900 employees. ish’s headcount has been stable since the second half of 2003 and no further significant reductions are planned. Approximately 30.0% of ish’s employees are former DTAG employees and have the right to return to DTAG, a right they were given with DTAG’s divestiture of its cable television business. For 10.0% of ish’s employees, included in the above percentage of 30.0%, the right to return to DTAG terminates at the end of 2005, but under certain circumstances and subject to negotiations the return right may be extended to June 2007 or to a later date. 20.0% of ish’s employees, included in the above percentage of 30.0%, have civil servant status. These employees have a permanent right to return to DTAG. ish has negotiated various collective bargaining agreements directly with one of its labor unions. These collective bargaining agreements cover the general labor conditions of ish’s employees (other than executives), such as working hours, holidays, termination, redundancy protection and general payment schemes for wages. ish intends to negotiate new and renegotiate existing collective bargaining agreements in 2005 to simplify structures and to increase workforce flexibility as ish introduces new products and services. During 2004 and 2005, ish renegotiated a significant number of its works council agreements. See “Risk Factors—Risk Related to Our Business—Strikes or other industrial actions as well as the negotiation of a new collective bargaining agreement could disrupt our operations or make it more costly to operate our facilities” and “Business—Business of ish—Employees.” Environmental Matters ish is subject to a variety of laws and regulations relating to land use and environmental protection. While ish could incur costs, such as clean-up costs, fines and third-party claims for property damage or personal injury, as a result of violations of or liabilities under environmental laws and regulations, ish has stated that it believes that it is in substantial compliance with applicable requirements of such laws and regulations. Legal Proceedings ish is involved in a number of legal proceedings that have arisen in the ordinary course of its business. Other than as discussed below, ish does not expect the legal proceedings in which ish is involved or with which it has been threatened to have a material adverse effect on its business or consolidated financial position. The outcome of legal proceedings, however, can be extremely difficult to predict with certainty, and no assurances can be offered in this regard. On December 11, 2003, ish received a letter from ARGE Kabel in relation to royalties for cable transmission of copyright protected works. ARGE Kabel claims that it is entitled to royalty payments from ish in an amount of 1.28% (based on its applicable tariff) of ish’s subscription revenues and has threatened to sue ish. The claim is limited to 40% of the amount that VG Media receives for their transmission rights from the private broadcasters. To date, ARGE Kabel has not filed a lawsuit against ish. ish has a dispute with Messe Frankfurt relating to the use of its trademark “ish.” Messe Frankfurt’s claims have been rejected in a decision of the Office for Harmonization in the Internal Market and Messe Frankfurt has appealed this decision. ish has stated that it believes that Messe Frankfurt’s claims have no merit and ish intends to vigorously defend the use of its name. In addition, ish has filed an application to the German Patent and Trademark Office for the partial cancellation of the trademark “ish” held by Messe Frankfurt. The Office for Harmonization of the Internal Market has postponed the proceedings until the end of the proceeding at the Deutsches Patent-und Markenamt.

Competition The cable television and Internet services industries are competitive, and iesy and ish face significant competition from established and new competitors in these areas. See “Risk Factors—Risks Relating to Our Business—We operate in competitive industries, and competitive pressures could have a material adverse effect on our business” and “Industry.” Television Satellite A major competitive force in the German television market is satellite television, which can be divided among three types of access: Free-to-Air Satellite. Residential subscribers in single or small dwelling units may install a satellite receiver to view a large number of programs on a free-to-air basis. SMATV. Level 4 operators and in certain cases larger housing associations may install a satellite receiver and headend equipment to provide satellite television to their subscribers or tenants, as the case may be, on a shared access basis. In this case, the Level 4 operator or the housing association will not incur ongoing subscription fees but may charge certain fees to their subscribers or tenants. Premium Satellite Television. Residential subscribers may also install a satellite receiver when they subscribe to satellite premium cable television, in particular Premiere. Currently, approximately 42.7% of all television households in Germany receive satellite television. Recently, satellite has gained market share at the expense of other means of distribution, including cable. iesy and ish seek to compete with satellite television by means of their pay-per-view services and the bundling of premium cable television services with high speed Internet and telephony, neither of which are obtainable through satellite competitors. Terrestrial Television Other television delivery media include analog terrestrial television and DVB-T. Analog terrestrial television market share has been in decline for a number of years. It has a limited number of channels compared to cable and satellite. RegTP is generally required to revoke all allocations of frequencies for analog television transmission by December 31, 2010. DVB-T is being promoted by the German state media authorities as a means to provide a larger number of channels on terrestrial television. DVB-T will provide for 18 to 24 digital programs. In order to receive DVB-T, a consumer must acquire an antenna and a set-top box. However, DVB-T can be received without the payment of any subscription fees. Because the transmission footprint of DVB-T is smaller than analog, more towers are required to cover the same geographic territory, which increases the cost of transmission. The first DVB-T distribution system was piloted in Berlin. See “Industry—The German Television Market—Distribution Platforms—Terrestrial.” Video and Television Distribution Over the Internet Improvements are being made to Internet access and data transmission technologies, in particular DSL technologies. Recently, the Internet is being used as a platform for the distribution of video-on-demand services to Internet subscribers. ish has been operating a pilot program for video on demand over the Internet since November 2004. The major provider of these video-on-demand services in Germany is an affiliate of DTAG, offering these services under the brand “T-Online Vision.” There are also a number of smaller providers, such as Arcor AG & Co. KG and HanseNet Telekommunikation, that offer real-time stream of television services via DSL technology. Over time, these services may develop into a viable competitive force for the mass distribution video or television market. Mass market acceptance of video distribution over the Internet requires high DSL penetration. As it currently stands, the Internet offering throughout Germany is technically limited for the distribution of video services and the real-time streaming of television services would require substantial investments in compression technology and the availability of bandwidth. In the future, subscribers with television cards in their home computers may be required to pay for a television license. Level 4 Operators Level 4 operators typically enter into long-term contracts with housing associations, which limits iesy’s and ish’s opportunities to win new customers and may hinder iesy’s and ish’s efforts to market its services effectively to housing 189